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News - 21 October 2013

Labour plans payday lenders levy to fund low-cost credit

If elected in 2015, Labour would impose an extra charge on the lenders on top of fees already paid by all finance firms to help support credit unions and other low-cost alternatives to bank loans.

The measure will help those already in "desperate need" and people at risk of wracking up huge debts they cannot repay in future, Ed Miliband will say. Lenders have been criticised for making loan offers with up to 4,000% interest.

The Labour leader, Mr Ed Miliband, will claim the squeeze on living standards is causing a "personal debt crisis" with a third of those taking out payday loans currently doing so to meet the cost of heating their homes. A future Labour government, he said, will go further and force lenders to fund cheaper sources of credit to provide a "real alternative for people in desperate need".

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
“Payday lenders, along with all financial service providers, already pay fees to the Financial Conduct Authority to help fund services such as debt advice. But Labour says the large profits made by some payday lenders mean that a supplementary charge is justified.”

Labour says the "explosion" in the payday lending market - which it says has doubled in size to £2.2bn in the last four years - is directly related to what it says is a "cost of living crisis".

As many as five million families plan to borrow money from payday lenders in the next six months, and more than 1.5 million households spend more than 30% of their income on unsecured credit repayments, it says.

The Church of England has condemned the practices and ethics of some payday lenders and pledged to launch its own credit service to force many of them out of business.
 

But lenders say they are helping people in genuine need with no-one else to turn to and that firms who are members of Consumer Finance Association are heavily regulated already.
 

For business advice and a more personal approach, contact us now to see how ABDS can help

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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